NPD offers a preliminary estimate of 2010 consumer spending "on gaming content via all monetization methods, including new physical video and PC games, used games, game rentals, subscriptions, digital full-game downloads, social network games, downloadable content, and mobile game apps," saying this is between $15.4 and $15.6 billion, and this represents sales that are flat or down by as much as 1 percent compared with 2009. They go on to say: "Based on this estimate, spending on new physical content at retail continues to account for the majority of the total consumer spend on games content. U.S. retail sales of new physical video game content, which includes portable, console and PC game software, generated revenues of $10.1 billion, a 5 percent decline over the $10.6 billion generated in 2009." They point to PC game sales as one of the bright spots in the study:

Bright spots came from PC games new physical retail software, which was up 3 percent in 2010, as well as increases in the consumer spend on used games sales, full-game digital downloads and downloadable content, mobile gaming apps, and social network gaming, which offset declines in console and portable new physical game sales, rentals, and subscriptions.

Ruffiana wrote on Jan 14, 2011, 17:57:You can't argue with ASeven's position. If it happens, he was right. If it doesn't happen, he's still right and it just hasn't happened yet.

Heh. Ok, let me put on a time limit then. 3 years. If in 3 years the industry still stands as it is I'll eat my words and stand up and say my calculations and estimations were downright wrong, because they clearly were if it's standing in 3 years.

Unfortunately when dealing with the evolution of an industry you can't say a year or even a couple of years, too short of a time. Even 3 years is too short of a time but if the current economic conditions of the world remains or worsen and if the industry doesn't change its models and cuts the costs of developments, 3 years should be enough time to dictate if the current industry thrives or falls.

Difference between 2004 and 2010 is that 2010 is the third year running that the industry is down, after 2009 and 2008

2003 was also down. The economy was much stronger back then. 2005, with a new console, was up. 2011 will be down.

So, 2003 with a strong economy was down. 2011 with a weak economy will also be down. Here's something interesting, economists are predicting that the end of the recession is still very far, far off and if anything, things will get much worse before they get better. Guess where that leaves the gaming industry then.

Beamer wrote on Jan 14, 2011, 14:22:

In 2004 sales were choked due to the release of the new consoles next year, people were expecting new hardware and knew it was coming as they were announced, so they held off buying games.

No one stops buying games because new consoles are 12-24 months away (depending on the time of year.) Do people stop buying new consoles? Some. It really depends. The people buying consoles at this stage of the game tend to be price sensitive and waiting on new $400-$500 machines isn't what they hope to do.But why would someone not buy the latest and greatest just because there will be new machines in a year? They still need to use the machine they have.

Because there's a thing called consumer tendencies and mass perceptions. The moment a new console is announced gamers will start holding off buying games. Why? Simple answer, most console gamers are kids and they start saving money for the next console instead of buying games and the sooner they start saving it the better in their minds. Simple economic reality.

Beamer wrote on Jan 14, 2011, 14:22:

Gamers are fickle, they want the next big thing, and right now they want the next big console generation.

Yes. Yes it is stagnation and saturation. But it's planned. The cost for Microsoft, Sony and Nintendo to release new consoles is greater than any losses being made right now.

In any case you keep talking about "crash," but now you're saying all that's needed to prevent a crash is new consoles. Which is it? New consoles are coming.

Where did I say we needed new consoles? If anyone is mentioning that the industry needs new consoles is you, not me. I mentioned there isn't an announcement of new consoles and that is hurting the market. Saying new consoles are coming doesn't help because there's no confirmations whatsoever of anything other than portable ones.

Do we need new consoles? Yes, but if the industry focused on the PC alone it would also be as effective as releasing new consoles and I'll explain why. What the industry needs and what I've been telling everyone, including you, is a change of business models, an injection of innovation, more quality games, less cost in development of said games. New hardware won't save an industry that produces games that are often at best pure shit, that cost tens or even hundreds of millions to produce and develop, and that would mean that even if the industry went full PC if they keep producing shit they'll never get out of the hole they got themselves dug in.

In fact, the crucial factor in this equation is the one you never mentioned, the rising costs of developing a game and the rising number of sales of game units that have to be done for a publisher to break even on the investment. Do you honestly think an industry that spends millions upon millions on any given project will survive for long, especially with a recession? The market is getting saturated and gamers are getting less games, yet publishers still keep on producing multi-million projects and many have already blown up on their faces, see Square and FFXIV. Do you really think the industry will keep on spending millions like if it was water and expect the market to absorb all those costs and give back profit, knowing that gamers are buying less and less games?

As much as you root for the industry, the growing development costs alone should scare the hell out of you if you just took a step back and detach your bias from the industry.

Beamer wrote on Jan 14, 2011, 14:22:Then you get into stocks. EA plummeted in 2008. There's a surprise: a manufacturer of expensive luxury goods got hit hard when the economy tanked. Sony's stock looks the same. Panasonic's stock looks the same. Motorola's stock looks the same. Dell's stock looks the same. AT&Ts. Just about every consumer electronics company took a huge dive in 2008 and has near-flatlined (with the extremely obvious exception of Apple.) Maybe the entire consumer electronics industry is going to die!

So... 2003 was a strong economics and sales got down but the stocks held, 2008 was the recession and the stocks lowered. Ok, you are using the recession argument and you are right, partly at least, because you aren't painting the whole picture and using broad brushes to spill the paint to other, needless arguments.

The less disposable income a family has the more normal, necessary goods they get and the less luxury goods the buy, an economic reality. In fact, inferior goods become normal goods the less disposable income you have. However what you are leaving out and not understanding is this, the industry's dive was worse than any of the other entertainment industries. Worse than movies, worse than music, worse than TV. Why? Gaming is too expensive compared to all the other entertainment, whether this be a fact or a perception. Add to that that all the other companies you mentioned don't spend millions on projects that have a high risk of failure like games do. Add to that the market saturation of games which means there's too many games but not enough buyers, the quality of said games which is less than average and gamers' confidence decreasing due to publishers producing shit and we have a problem. Add the growing development costs for making a game which are now reaching levels that cannot be maintained for long. Now add the recession. Not so pretty a picture now, right?

People will always listen to music, will always watch TV, will even often watch movies, because those industries have been here long before the gaming industry and have grown a cultural tradition around them, something gaming hasn't done yet. But gaming isn't that solid industry you like it to be. It's a very young industry, it has a lot of entertainment alternatives and of all the entertainment market, is the one hit worse by the recession, or any recession, because gaming is, as I've said, more expensive than any other alternative, and it doesn't matter that in fact it isn't, the public perceives it as more expensive and therefore the public, the masses, will avoid gaming and select another entertainment media.

InBlack wrote on Jan 14, 2011, 10:43:The book industry would kill to have figures approximating these for one thing, not to mention the car industry, construction, manufacturing...etc. etc. etc...

Compared to all of these the gaming industry is basically blooming...

Actually, the manufacturing sector is doing extremely well in terms of output... the problem is that it's also extremely productive, and the gains in productivity greatly eclipse those of output. When that happens, employment in the sector greatly decreases.

The gaming industry doesn't have comparable improvements in productivity, so it's better positioned for surviving a stagnant market, but still the real (inflation-adjusted) numbers make clear that you can't be stagnant in nominal (absolute) terms and expect to keep everyone on.

Difference between 2004 and 2010 is that 2010 is the third year running that the industry is down, after 2009 and 2008

2003 was also down. The economy was much stronger back then. 2005, with a new console, was up. 2011 will be down.

In 2004 sales were choked due to the release of the new consoles next year, people were expecting new hardware and knew it was coming as they were announced, so they held off buying games.

No one stops buying games because new consoles are 12-24 months away (depending on the time of year.) Do people stop buying new consoles? Some. It really depends. The people buying consoles at this stage of the game tend to be price sensitive and waiting on new $400-$500 machines isn't what they hope to do.But why would someone not buy the latest and greatest just because there will be new machines in a year? They still need to use the machine they have.

Gamers are fickle, they want the next big thing, and right now they want the next big console generation.

Yes. Yes it is stagnation and saturation. But it's planned. The cost for Microsoft, Sony and Nintendo to release new consoles is greater than any losses being made right now.

In any case you keep talking about "crash," but now you're saying all that's needed to prevent a crash is new consoles. Which is it? New consoles are coming.

Then you get into stocks. EA plummeted in 2008. There's a surprise: a manufacturer of expensive luxury goods got hit hard when the economy tanked. Sony's stock looks the same. Panasonic's stock looks the same. Motorola's stock looks the same. Dell's stock looks the same. AT&Ts. Just about every consumer electronics company took a huge dive in 2008 and has near-flatlined (with the extremely obvious exception of Apple.) Maybe the entire consumer electronics industry is going to die!

Beamer wrote on Jan 14, 2011, 12:09:You see what you want to see. You also don't see history. Video game sales were down in 2004. What was happening in 2004? I dunno, maybe we were closing in on the end of the product lifespan. What's happening in 2010? I dunno, maybe we're closing in on the end of the product lifespan. 2004 sales were 500 million less than 2002 sales. Did people jump out windows then? 2004 was five years into that generation. 2010 was five years into this generation. 2004 was the last year of that generation. We have two more to go of this one. Declines will continue. Every hardware cycle has an equivalent financial cycle. We're on the down part. It's not unexpected. Hardware sales plummeted vs. last year. We also had a price cut last year that got people to make the move they'd been waiting on.

Worth pointing out video game sales were only 9.9 billion in 2004. Look at where they are now.

Difference between 2004 and 2010 is that 2010 is the third year running that the industry is down, after 2009 and 2008. It's a downward slope that gives no sign nor indication that it will change anytime soon. In 2004 sales were choked due to the release of the new consoles next year, people were expecting new hardware and knew it was coming as they were announced, so they held off buying games. Fast forward to 2010, no news on any new hardware yet for 3 years straight sales have been coming down. This smells me of market saturation and stagnation, to put it bluntly, gamers from all platforms are sick and tired of the same old rehashed shit and are getting burnt out with the same hardware. Gamers are fickle, they want the next big thing, and right now they want the next big console generation. As for the number the industry drew in 2004 and today, easily explained with something called inflation and money devaluation through time.

The thing that a lot of people are refusing to see is simple, the market wants a generation leap, new consoles, however none are forthcoming. Much like the first crash, publishers are throwing more and more games that look the same from 3 years ago but with less quality. Gaming is not the only entertainment option out there and people are moving away from gaming altogether, something that alarms me. They aren't shifting platforms, they are actually moving from gaming altogether. This is bad, bad news for the gaming industry.

There's a reason why I defend indies. It's not only because I love their games but that if the worst comes to worst gaming will have somewhere to fall back on and rebuild itself again.

All the data, from sales numbers to financial statements to even the value of stocks (Want to see something nice? Pick any publisher but Activision and watch their stock price timeline. Like EA for instance, look at its stock price from 2000 to today and tell me it doesn't scare the hell out of you) tells me one simple story, this industry is going through exactly what the industry went in the first crash. More people are seeing this but unfortunately most insiders are fighting this, and with this provoking the demise of the industry a second time, much like they fought in the first crash. The same arguments you are using were used on the first crash to justify what the industry was doing. Either the industry changes its models of working or it might as well write itself off.

It's as if I'm watching a rerun of history itself, right down to the finest economic details. But then, if the industry does crash then they will have none to blame but themselves. Just don't say you weren't warned with ample anticipation when it happens.

You see what you want to see. You also don't see history. Video game sales were down in 2004. What was happening in 2004? I dunno, maybe we were closing in on the end of the product lifespan. What's happening in 2010? I dunno, maybe we're closing in on the end of the product lifespan. 2004 sales were 500 million less than 2002 sales. Did people jump out windows then? 2004 was five years into that generation. 2010 was five years into this generation. 2004 was the last year of that generation. We have two more to go of this one. Declines will continue. Every hardware cycle has an equivalent financial cycle. We're on the down part. It's not unexpected. Hardware sales plummeted vs. last year. We also had a price cut last year that got people to make the move they'd been waiting on.

Worth pointing out video game sales were only 9.9 billion in 2004. Look at where they are now.

And you clearly have no notion of what stagnation or even a low percentage of loss, even though 5% is far from low, can do to an industry. Stagnation kills whole markets.

Jesus, man, you're overreacting like mad.

Stagnation does not kill whole markets. Growth slows, especially in bad economies. You can't simply look at one number and make any kind of judgment call about it. It's idiotic.

I'm not looking at a single number, I'm looking at the whole industry performance since 2008 and its monthly performance. As for stagnation not killing a market, you have several examples out there, especially in the field of technology. Commodore and the Amiga in particular, for instance. Stagnation of hardware progress led to a progressive stagnation and consequent decline of sales of the Amiga and the end result was the end of Commodore itself. This is one of the most famous examples, it's easy to find many more.

Bottom line, regardless of the state of the world economy, stagnation in innovation, through technology or ideas, always lead to market saturation and stagnation and from there to a deep decline.

Beamer wrote on Jan 14, 2011, 11:21:So fewer sales may be wholly expected as a result of fewer expenditures and fewer releases. If the industry invest 20% less yet only made 1% less it's a win.

9% drop in December, 5% drop in the industry for the whole year. For someone berating me from making rash calls your insistence in not reading the Gamasutra article which has the more complete numbers from NPD than the article linked here does not look good on you.

With the kind of money this industry moves 5% is a fucking lot. You may be an industry insider and may know how development works but I am a financial insider and what this industry is going through is exactly like many other industries before the bubble burst and they came down. Hell, this industry is doing the same mistakes of the first crash, even if the players and the technology is different.

Beamer wrote on Jan 14, 2011, 11:21:You're making huge, rash calls off of one number without any kind of insight into the entire picture.

I'm not making rash judgments, industry movers and insiders are just being slow on the taking and blind on what's really going on around them. I have a lot of financial insight into the industry though, an analyst lives and dies by his or her network of contacts and mine is quite broad. And I'm not making rash judgments based on a single number, I'm making it based on the whole industry history from 2008 on, and all the data it produced.

This industry is pretty much like watching a train wreck about to happen, with the difference the industry can actually avoid the disaster if they want since there's still time. But the numbers each month show one thing, the industry is unwilling or unable to wish to prevent this.

I wonder if in 1978 if we had vast internet access then, if the forums back then would be filled with industry insiders like you saying the same things? More than likely since the publications of that time do show insiders having the same tone in the letters section. Whether you like it or not Beamer I call things as I see them, and right now for me, and most of my fellow colleagues as well, this industry is heading towards something disastrous if it doesn't change models quickly. And it's not even about PC or consoles, it's about lack of adaption, lack of innovation and quality in products, reaching a saturation of market and basically doing the same stupid mistakes of the first crash.

And you clearly have no notion of what stagnation or even a low percentage of loss, even though 5% is far from low, can do to an industry. Stagnation kills whole markets.

Jesus, man, you're overreacting like mad.

Stagnation does not kill whole markets. Growth slows, especially in bad economies. You can't simply look at one number and make any kind of judgment call about it. It's idiotic.

Let's consider what happened in 2008: the economy imploded. How did many publishers react? Well, they closed a bunch of studios and canceled a bunch of projects. What is the average dev cycle? 2 years. When would most of those canceled projects and closed studios release? 2010.

So fewer sales may be wholly expected as a result of fewer expenditures and fewer releases. If the industry invest 20% less yet only made 1% less it's a win.

You're making huge, rash calls off of one number without any kind of insight into the entire picture.

And what happens even longer term is you realize you are just as well off as ever but are saving big $$$ now. You realize you don't have to have the game the first week it's released. So whenever they do wake up and price their products accordingly, you are now a different shopper forevermore. They are messing up how their potential base looks at and buys games. I'm like you, but probably 3 years into my cycle, unless there is something so perfect coming out for me, almost everything now is bought when there is a noticeable sale on it and anymore that only means a month or two for most. The person who is one year behind the release cycle is buying AAA games, with added content and a few patches added in for good measure for $20. Smart buyer.

As to overall numbers, who really knows in the PC world? The various ways you can get games now and that too many of these companies aren't bound to report specifics to any one specific entity. How can you really tell? When a gamer at this sight thinks game sales, it's always narrowed down to our focus. But there is a lot of games and players out there under the true definition of "game", which is a huge market and impossible to get a really solid lead on things overall. Yes you can gauge an Activision or a EA, but they aren't the entire PC gaming market, it's good to see an indie revival, it's good to see foreign offerings, I love both as they are a different take on gameplay, instead of the same old same old these Wall Street companies feed us. But who are these companies reporting to? No one.

End of the day all that matters to me is when I feel like something new, all I need is for that singular game to be out there for me to buy and good for me, that game is usually $20 now. Win.

InBlack wrote on Jan 14, 2011, 09:18:Sales are down 1%. 1%. Let me repeat that again just for good measure:

1%!!!!!!!!!!!!!!!!!!!!!

OMG THE SKY IF FALLING, WE ARE DOOMED!!

Ok now that that is out of the way, there is no way that NPD's statistics are correct. For one Im pretty sure that they DO NOT have access to the majority of digital distribution sales figures. (Read Valve and Steam)

Sales are down 1%. 1%. Let me repeat that again just for good measure:

1%!!!!!!!!!!!!!!!!!!!!!

OMG THE SKY IF FALLING, WE ARE DOOMED!!

Ok now that that is out of the way, there is no way that NPD's statistics are correct. For one Im pretty sure that they DO NOT have access to the majority of digital distribution sales figures. (Read Valve and Steam)

Mac wrote on Jan 14, 2011, 03:18:I believe it was Steam that demonstrated that selling a game at a cheaper price point actually generates more revenue and margin when Unreal Tournament 3 went on a weekend sale. It generated more income in that weekend than it did in its launch week. Given digital distribution, this kind of model should be far easier to achieve, yet we see the opposite at the moment, where digital is generally more expensive than retail (in the UK at least).

Despite Gabe's charts that say otherwise though I really wonder how that is effecting profits overall. You can only drop prices in half a month after launch so many times before all but the most diehard of diehards waits for a sale before purchasing.

As PC players we are now being asked to pay console prices (where the publishers do not have to pay their pound of flesh to Microsoft or Sony - hence it appears as profiteering) - yet given the DRM on PC games, whatever we purchase has no residual value as Console games do as they are able to be traded/sold. So in effect, we are paying even more on a net basis than people are on the consoles, and we have to jump through far more hoops to get our games working. Really strange model - asking people to pay more for a worse service.

Ehhh... I kind of see that. At the same time though things are worth what people pay for them, nothing more and nothing less, and the $60 price point has been more or less very successful. I think we need more varied pricing... more games coming out at lower (or even higher) prices. I would pay $100 for a massive game like Fallout: New Vegas, but I only want to pay $20 for a 6 hour shooter like Singularity.

Jerykk wrote on Jan 14, 2011, 03:04:I'm not sure sales of WoW really have an adverse effect on sales of other games. The majority of WoW players are not hardcore PC gamers in general. They pretty much only play WoW on PC and if WoW didn't exist, they simply wouldn't be playing PC games.

I think that's one hell of a thick brush you are painting with there. Sure, some WoW players might fall into that description... fuck, I'll grant you half of them. Not all though, many of them are PC gamers who have gone MMO and it limits their purchases in other areas. As I said in the other thread I can't even count the number of times I have seen something to the effect of "WoW is the only game I need."

I believe it was Steam that demonstrated that selling a game at a cheaper price point actually generates more revenue and margin when Unreal Tournament 3 went on a weekend sale. It generated more income in that weekend than it did in its launch week. Given digital distribution, this kind of model should be far easier to achieve, yet we see the opposite at the moment, where digital is generally more expensive than retail (in the UK at least).

It's important to consider the impact of perceived value. If people think they are saving a lot of money, they are more likely to buy something even if they don't really want it. For example, if a game retails for $60, then goes on a weekend sale for $30, it's probably going to get more sales than it would have if it had retailed for $30 to begin with.

This is not to say that having a lower MSRP won't get you more sales. However, it's a bit iffy to base your entire opinion solely on the success of limited time sales.

I have bought less games personally. This is due to a number of factors, but predominantly price. Just over a year ago, games were available in the UK for £17.99 pre-order – I used to pre-order 2 or 3 games a month, and even though some were duds, I didn’t mind too much at that price point. However, games then increased to £24.99 and now more and more are being released at £29.99.

I can understand AAA games coming out with a higher price tag, but what I cannot understand is why sub-par games think they can charge the same price as AAA. Given this, I am reluctant to pre-order any games now until I have read a few reviews and forums. This has resulted in my changing my buying habits from purchasing ~25 games a year, to only buying 11 games last year, and only 2 of those at full price. I generally wait for the sales and stock up on games.

So I have effectively gone from spending ~£450 per annum to spending ~£140.

The games, I used to take a punt on just never get bought anymore. I will not take a risk at £30, and even though the price in the UK drops very quickly, I generally forget about a game after launch in any case. Even more so when it scores badly and gets bad reviews.

We are in a strange cycle at the moment, whereby most games take no risks and basically just re-skin the Unreal Engine, so you feel like you have played the same game umpteen times already. I begrudge paying over and over again to play the same game (one of the reasons I am committed to buying no more COD games in fact – they have all been the same game since COD 4).

I believe it was Steam that demonstrated that selling a game at a cheaper price point actually generates more revenue and margin when Unreal Tournament 3 went on a weekend sale. It generated more income in that weekend than it did in its launch week. Given digital distribution, this kind of model should be far easier to achieve, yet we see the opposite at the moment, where digital is generally more expensive than retail (in the UK at least).

As PC players we are now being asked to pay console prices (where the publishers do not have to pay their pound of flesh to Microsoft or Sony - hence it appears as profiteering) - yet given the DRM on PC games, whatever we purchase has no residual value as Console games do as they are able to be traded/sold. So in effect, we are paying even more on a net basis than people are on the consoles, and we have to jump through far more hoops to get our games working. Really strange model - asking people to pay more for a worse service.

Surely, reducing prices and finding the sweet spot would help companies increase sales and margin, whilst at the same time potentially combating piracy?

Let me just add, it has nothing to do with my income (I have a very good job), but it is all to do with what I believe is "value for money", which is of course a personal measure.